Treasury Secretary Scott Bessent is urging an internal review of the Federal Reserve, as pressure mounts on Chairman Jerome Powell. This comes amid calls for Powell’s resignation and criticism of the Fed’s actions.
Bessent’s Call for Review
Bessent, in a recent Bloomberg interview, stated that the Fed needs closer scrutiny. He points to the significant growth in the Fed’s budget and operations over the years as a cause for concern. He emphasized that this expansion risks compromising the Fed’s independence in setting monetary policy. He noted that the Fed’s central budget has quadrupled since 2004.
Bessent’s suggestion follows President Trump’s repeated calls for Powell to resign and criticism from economist Mohamed El-Erian. However, Bessent believes an internal review, separating monetary policy from other Fed activities, would benefit both Powell and the institution. He even suggested that Powell himself could oversee this review.
The Need for Scrutiny
Bessent highlighted the need for self-examination, suggesting the Fed could form a committee, invite outside experts, or even conduct an external review if the initial internal assessment proves insufficient. He cited the Bank of England’s post-2022 review as a positive example of how such an examination can be conducted. He believes that this type of review is crucial to maintaining the Fed’s effectiveness and independence.